All companies try to minimize taxes, obviously. And tech
companies, it turns out, are ideally suited to skirting tax
laws--because tech products can be "sold" from anywhere,
regardless of where they're designed or made.

But Apple appears to have been as spectacularly creative and
successful in tax-avoidance as it has been in gadgets.

Last year, for example, Apple's global cash tax rate was only
9.8%. It paid $3.3 billion of cash taxes on profits of $34
billion. (Cash taxes are the taxes Apple actually paid, as
opposed to the "tax" line that appears on the income
statement.) This compares to a tax rate of 24% for Walmart,
which, according to Duhigg, is about average for a major global
corporation.

In the U.S. last year, Apple's tax-avoidance schemes allowed it
to save $2.4 billion in federal taxes alone, according to one
study. The company likely saved millions more by avoiding
state and local taxes.

Per Duhigg, here are some of Apple's tax-avoidance tricks:

Apple's first major move has been to find ways to
allocate 70% of its profits outside the U.S., despite the fact
that most of its executives and product designers are located
here. The U.S. tax code was supposedly designed to tax
companies on where most of their value is created, rather than
where the products are made or sold, but Apple has found ways
around that.

The cash generated by Apple's U.S. business is not
collected or managed by the company's headquarters in
California. It's collected and managed by a subsidiary called
Braeburn Capital located in Nevada. Why? Because
California has a corporate tax rate of 8.84%, while Nevada has
no corporate tax rate. Thus, Apple pays no taxes on profits
generated by its cash. Braeburn also helps Apple reduce taxes
in other states, which have lower rates for companies that
manage their finances elsewhere.

At the same time that Apple is avoiding California
taxes by managing its cash in Nevada, it is getting tax credits
from California for conducting "research and development" in
California. Apple has benefitted from more than $400
million of R&D credits since 1996, Duhigg says.

Internationally, Apple invented a tax-avoidance scheme
known as the "Double Irish With A Dutch Sandwich," which is now
used by hundreds of other companies. This scheme
routes royalties and profits generated on U.S. inventions
through subsidiaries in Ireland and the Netherlands and then to
the Caribbean. On an accounting basis, Ireland "generated"
one-third of Apple's revenue last year. Apple has also assigned
some of the ownership of its Ireland operation to a subsidiary
with no employees in the Caribbean, and routes other Irish
profits through the Netherlands, which is also basically
tax-free.

Apple makes sure that salespeople located in high-tax
countries are actually employed by Apple subsidiaries in
low-tax countries. For example, a salesperson located
in high-tax Germany might sell Apple products on behalf of an
Apple subsidiary located in low-tax Singapore--and the sales in
Germany are then taxed at low Singaporean rates.

Apple has decreed that many global "iTunes" sales
legally happen in Luxembourg, because Luxembourg offers tax
incentives for companies that process transactions
there. This dodges taxes in the U.S., France, Britain,
and other countries that would charge much higher rates.

And so on...

Now, all this, of course, is perfectly legal. And hundreds of
other companies take advantage of many of the same sorts of
tricks that Apple uses.

And Apple does still pay billions in taxes ($3.3 billion, on
profit of $34 billion).

But while Apple is going to heroic lengths to set up subsidiaries
in Nevada and the Caribbean, of course, California is going
broke.

And so is Cupertino, where Apple is building its amazing new
spaceship headquarters.

So, not surprisingly, many in California are angry about how much
tax Apple avoids paying in the state. And so, presumably, are
some folks in the federal government, Britain, France, Germany,
and other countries in which Apple is following the letter of the
law, but not the spirit.

The answer is certainly not for the U.S. or California to
suddenly "crack down" on Apple--if that happened, the company
would immediately leave the United States altogether, taking the
taxes it does pay with it.

The answer--if the goal is to force Apple and other companies to
pay higher taxes--is probably for world trade organizations to
come together and establish consistent policies across the world.
But that's easier said that done.

So, in the meantime, the usual adage applies: Paying taxes is for
the little people.